FGP Ferrellgas Partners LP

Ferrellgas Partners, L.P. (NYSE:FGP) today announced Adjusted EBITDA of $138.3 million for the second quarter of fiscal 2016 ended January 31, 2016, an increase from $136.9 million in the prior year period.

President and Chief Executive Officer Stephen L. Wambold commented, “Despite this being one of the warmest winters on record, our ongoing midstream diversification efforts allowed us to deliver a year-over-year increase in Adjusted EBITDA. Bridger continues to exceed our expectations and we are carefully controlling costs to help offset the challenging operating environment for our Propane and related equipment sales segment.”

Mr. Wambold continued, “Looking ahead to the second half of our fiscal year, we will maintain focus on operations and strategic execution. Additionally, we will continue to consider value-enhancing organic and external growth initiatives to mitigate the impact of continued warm weather and capitalize on opportunities created by low crude oil prices. We have ample financial flexibility to drive growth without accessing the capital markets, and we are confident that we have the pieces in place to create significant value for all Ferrellgas unitholders.”

Continued strong expense controls in the Propane and related equipment sales segment helped offset the impact of elevated temperatures, which were 19% warmer than normal and 16% warmer than the prior year period.

Adjusted EBITDA from the Midstream - Crude Oil Logistics segment was $28.7 million during the second fiscal quarter, which exceeded management’s expectations. These results reflect the strength of Bridger’s customer relationships amid sustained volatility in commodity pricing, and management’s ability to carefully control expenses and drive efficiencies.

Operating expense for the second fiscal quarter increased to $116.5 million from $107.1 million in the prior year period, due to incremental operating expenses from Bridger and non-cash items related to the changes in fair value of fuel derivatives and contingent consideration in the current year and prior year, respectively.

Interest expense totaled $34.7 million for the second fiscal quarter, compared to $24.4 million a year ago, largely due to $500 million of notes issued in connection with the Bridger acquisition in June 2015.

Net earnings for the quarter was $57.8 million, or $0.58 per common unit, compared to net earnings of $86.4 million, or $1.02 per common unit, in the prior year quarter. The decrease in net earnings is due in part to the increase in interest expense discussed above and warm weather, as well as depreciation and amortization expenses related primarily to the Bridger transaction.

Ferrellgas also today announced that, due to sustained warmer temperatures and the current commodity price environment, it is revising its previously announced estimates for full-year fiscal 2016 Adjusted EBITDA to a range of $360 million to $375 million. Based on the midpoint of the Company’s fiscal 2016 estimates for Adjusted EBITDA, Ferrellgas expects its DCF coverage ratio to increase to above 1.0 by the end of the fiscal year.

About FerrellgasFerrellgas Partners, L.P., through its operating partnership, Ferrellgas, L.P., and subsidiaries, serves propane customers in all 50 states, the District of Columbia, and Puerto Rico, and provides midstream services to major energy companies in the United States. Ferrellgas employees indirectly own 22.8 million common units of the partnership, through an employee stock ownership plan. Ferrellgas Partners, L.P. filed a Form 10-K with the Securities and Exchange Commission on September 29, 2015. Investors can request a hard copy of this filing free of charge and obtain more information about the partnership online at www.ferrellgas.com.

Statements in this release concerning expectations for the future are forward-looking statements. A variety of known and unknown risks, uncertainties and other factors could cause results, performance and expectations to differ materially from anticipated results, performance and expectations. These risks, uncertainties and other factors are discussed in the Form 10-K of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. for the fiscal year ended July 31, 2015, in the Form 10-Q of Ferrellgas Partners, L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and Ferrellgas Finance Corp. for the quarters ended October 31, 2015 and January 31, 2016 and in other documents filed from time to time by these entities with the Securities and Exchange Commission.

FERRELLGAS PARTNERS, L.P.  AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
ASSETS		January 31, 2016				July 31, 2015
Current Assets:
Cash and cash equivalents		$	11,754			$	7,652
Accounts and notes receivable, net (including $190,063 and 123,791 of
accounts receivable pledged as collateral at January 31, 2016
and July 31, 2015, respectively)			264,382				196,918
Inventories			92,488				96,754
Prepaid expenses and other current assets			57,134				64,285
Total Current Assets			425,758				365,609
Property, plant and equipment, net			966,995				965,217
Goodwill			445,659				478,747
Intangible assets, net			564,964				580,043
Other assets, net			74,985				74,440
Assets held for sale			3,120				-
Total Assets		$	2,481,481			$	2,464,056
Loss on disposal of assets and other
Current Liabilities:
Accounts payable		$	136,100			$	83,974
Short-term borrowings			86,200				75,319
Collateralized note payable			119,000				70,000
Other current liabilities			150,934				180,687
Total Current Liabilities			492,234				409,980
Long-term debt (a)			1,894,790				1,804,392
Other liabilities			40,335				41,975
Contingencies and commitments
Partners' Capital:
Common unitholders (98,002,665 and 100,376,789 units outstanding at
January 31, 2016 and July 31, 2015)			143,655				299,730
General partner unitholder (989,926 and 1,013,907 units outstanding at
January 31, 2016 and July 31, 2015)			(58,619	)			(57,042	)
Accumulated other comprehensive loss			(33,317	)			(38,934	)
Total Ferrellgas Partners, L.P. Partners' Capital			51,719				203,754
Noncontrolling Interest			2,403				3,955
Total Partners' Capital			54,122				207,709
Total Liabilities and Partners' Capital		$	2,481,481			$	2,464,056
(a) The principal difference between the Ferrellgas Partners, L.P. balance sheet and that of Ferrellgas, L.P., is $182 million of 8.625% notes which are liabilities of Ferrellgas Partners, L.P. and not of Ferrellgas, L.P.

 

FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE, SIX AND TWELVE MONTHS ENDED JANUARY 31, 2016 AND 2015
(in thousands, except per unit data)
(unaudited)
		Three months ended								Six months ended								Twelve months ended
		January 31								January 31								January 31
			2016				2015				2016				2015				2016				2015
Revenues:
Propane and other gas liquids sales		$	376,856			$	560,867			$	622,157			$	955,228			$	1,323,945			$	1,930,902
Midstream operations			188,333				7,153				382,003				15,069				474,123				22,504
Other			84,049				97,953				116,224				139,031				237,378				277,069
Total revenues			649,238				665,973				1,120,384				1,109,328				2,035,446				2,230,475
Cost of product sold:
Propane and other gas liquids sales			174,829				330,692				296,580				595,506				678,298				1,241,634
Midstream operations			148,443				2,219				302,047				4,187				374,450				6,157
Other			55,774				68,071				70,222				89,963				150,956				184,090
Gross profit			270,192				264,991				451,535				419,672				831,742				798,594
Operating expense			116,463				107,147				231,444				210,030				453,696				436,514
Depreciation and amortization expense			37,367				23,943				74,346				47,252				125,673				90,596
General and administrative expense			12,062				10,621				24,302				21,449				59,284				44,556
Equipment lease expense			7,278				5,795				14,310				11,327				27,256				20,732
Non-cash employee stock ownership plan compensation charge			3,141				3,788				8,397				8,162				24,948				23,272
Non-cash stock-based compensation charge (a)			(2,456	)			318				5,666				16,430				15,218				30,588
Goodwill impairment charge			-				-				29,316				-				29,316				-
Loss on disposal of assets and other			2,524				1,414				17,441				2,375				22,165				7,167
Operating income			93,813				111,965				46,313				102,647				74,186				145,169
Interest expense			(34,730	)			(24,375	)			(68,518	)			(48,287	)			(120,627	)			(90,606	)
Other expense, net			(298	)			(178	)			(420	)			(627	)			(143	)			(1,379	)
Earnings (loss) before income taxes			58,785				87,412				(22,625	)			53,733				(46,584	)			53,184
Income tax expense (benefit)			1,030				1,041				186				531				(660	)			2,333
Net earnings (loss)			57,755				86,371				(22,811	)			53,202				(45,924	)			50,851
Net earnings (loss) attributable to noncontrolling interest (b)			628				913				(145	)			619				(295	)			678
Net earnings (loss) attributable to Ferrellgas Partners, L.P.			57,127				85,458				(22,666	)			52,583				(45,629	)			50,173
Less: General partner's interest in net earnings (loss)			571				11,955				(227	)			526				(456	)			502
Common unitholders' interest in net earnings (loss)		$	56,556			$	73,503			$	(22,439	)		$	52,057			$	(45,173	)		$	49,671
Earnings (loss) Per Unit
Basic and diluted net earnings (loss) per common unitholders' interest		$	0.58			$	0.89			$	(0.23	)		$	0.63			$	(0.48	)		$	0.61
Dilutive effect of two-class method (b)			-				0.13				-				-				-				-
Adjusted net earnings (loss) per unit available to common unitholders		$	0.58			$	1.02			$	(0.23	)		$	0.63			$	(0.48	)		$	0.61
Weighted average common units outstanding			98,334.4				82,716.9				99,355.6				82,448.3				93,169.4				81,337.7
Supplemental Data and Reconciliation of Non-GAAP Items:
		Three months ended								Six months ended								Twelve months ended
		January 31								January 31								January 31
			2016				2015				2016				2015				2016				2015
Net earnings (loss) attributable to Ferrellgas Partners, L.P.		$	57,127			$	85,458			$	(22,666	)		$	52,583			$	(45,629	)		$	50,173
Income tax expense (benefit)			1,030				1,041				186				531				(660	)			2,333
Interest expense			34,730				24,375				68,518				48,287				120,627				90,606
Depreciation and amortization expense			37,367				23,943				74,346				47,252				125,673				90,596
EBITDA			130,254				134,817				120,384				148,653				200,011				233,708
Non-cash employee stock ownership plan compensation charge			3,141				3,788				8,397				8,162				24,948				23,272
Non-cash stock based compensation charge (a)			(2,456	)			318				5,666				16,430				15,218				30,588
Goodwill impairment charge			-				-				29,316				-				29,316				-
Loss on disposal of assets and other			2,524				1,414				17,441				2,375				22,165				7,167
Other expense, net			298				178				420				627				143				1,379
Change in fair value of contingent consideration (included in operating expense)			-				(4,500	)			(100	)			(6,300	)			(100	)			(1,300	)
Severance costs ($805 included in operating costs and $51 included in general and administrative costs)			-				-				856				-				856				-
Litigation accrual and related legal fees associated with a
class action lawsuit (included in general and administrative expense)			-				-				-				723				83				1,147
Unrealized (non-cash) losses on changes in fair value of derivatives			3,870				-				4,908				-				7,320				-
Acquisition and transition expenses (included in general and administrative expense)			70				-				85				-				16,458				-
Net earnings (loss) attributable to noncontrolling interest (b)			628				913				(145	)			619				(295	)			678
Adjusted EBITDA (c)			138,329				136,928				187,228				171,289				316,123				296,639
Net cash interest expense (d)			(33,905	)			(23,287	)			(66,407	)			(46,177	)			(116,380	)			(88,297	)
Maintenance capital expenditures (e)			(3,214	)			(4,624	)			(9,429	)			(9,712	)			(19,329	)			(18,802	)
Cash paid for taxes			(5	)			(6	)			(5	)			(266	)			(451	)			(904	)
Proceeds from asset sales			1,863				1,312				2,876				2,729				6,052				4,771
Distributable cash flow to equity investors (f)			103,068				110,323				114,263				117,863				186,015				193,407
Distributable cash flow attributable to general partner and non-controlling interest			2,061				2,206				2,285				2,357				3,720				3,868
Distributable cash flow attributable to common unitholders			101,007				108,117				111,978				115,506				182,295				189,539
Less: Distributions paid to common unitholders			50,223				41,359				101,666				82,715				184,384				162,922
Distributable cash flow excess/(shortage)		$	50,784			$	66,758			$	10,312			$	32,791			$	(2,089	)		$	26,617
Propane gallons sales
Retail - Sales to End Users			189,460				215,996				300,433				340,143				569,071				619,320
Wholesale - Sales to Resellers			60,781				81,310				111,347				143,245				238,167				276,756
Total propane gallons sales			250,241				297,306				411,780				483,388				807,238				896,076
Salt water volume - Midstream operations (barrels processed)			4,222				4,722				8,956				8,719				17,272				11,219
Crude oil hauled - Midstream operations (barrels)			24,345								48,609								59,056
Crude oil sold - Midstream operations (barrels)			1,593								3,103								3,599
(a)  Non-cash stock-based compensation charges consist of the following:
		Three months ended								Six months ended								Twelve months ended
		January 31								January 31								January 31
			2016				2015				2016				2015				2016				2015
Operating expense		$	(466	)		$	67			$	752			$	3,612			$	2,315			$	6,610
General and administrative expense			(1,990	)			251				4,914				12,818				12,903				23,978
Total		$	(2,456	)		$	318			$	5,666			$	16,430			$	15,218			$	30,588
(b)  Amounts allocated to the general partner for its 1.0101% interest in the operating partnership, Ferrellgas, L.P.
(c)  Adjusted EBITDA is calculated as net earnings attributable to Ferrellgas Partners, L.P., income tax expense (benefit), interest expense, depreciation and amortization expense, non-cash employee stock ownership plan compensation charge, non-cash stock-based compensation charge, goodwill impairment charge, loss on disposal of assets, other expense, net, change in fair value of contingent consideration, litigation accrual and related legal fees associated with a class action lawsuit, unrealized (non-cash) losses on changes in fair value of derivatives, acquisition and transition expenses and net earnings (loss) attributable to noncontrolling interest.  Management believes the presentation of this measure on changes in fair value of derivatives, acquisition and transition expenses and net earnings (loss) attributable to noncontrolling interest.  Management believes the presentation of this measure on changes in fair value of derivatives, acquisition and transition expenses and net earnings (loss) attributable to noncontrolling interest.  Management believes the presentation of this measure is relevant and useful, because it allows investors to view the partnership's performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
(d)  Net cash interest expense is the sum of interest expense less non-cash interest expense and other expense, net. This amount includes interest expense related to the accounts receivable securitization facility.
(e)  Maintenance capital expenditures include capitalized expenditures for betterment and replacement of property, plant and equipment.
(f)  Management considers distributable cash flow to equity investors a meaningful non-GAAP measure of the partnership's ability to declare and pay quarterly distributions to equity investors. Distributable cash flow to equity investors, as management defines it, may not be comparable to distributable cash flow to equity investors or similarly titled measurements used by other corporations and partnerships. Items added into our calculation of distributable cash flow to equity investors that will not occur on a continuing basis may have associated cash payments. Distributable cash flow to equity investors may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
The following table includes a reconciliation of forecasted net earnings attributable to Ferrellgas Partners, L.P. to forecasted Adjusted EBITDA for the fiscal year ending July 31, 2016.
																						Forecast
																						Fiscal Year
																						Ending
																						July 31,
																							2016
Net earnings attributable to Ferrellgas Partners, L.P. (estimate) (g)																							(12,500	)
Interest expense (estimate)																							135,000
Income tax expense (estimate)																							1,000
Depreciation and amortization expense (estimate)																							150,000
Non-cash employee stock ownership plan compensation charge (estimate)																							26,000
Non-cash stock based compensation charge (estimate)																							18,000
Loss on disposal of assets (estimate)																							19,900
Change in fair value of contingent consideration (included in operating expense)																							(100	)
Severance costs																							900
Goodwill impairment charge																							29,300
Adjusted EBITDA (h)																							367,500
(g) Represents estimated net earnings attributable to Ferrellgas Partners, L.P. after adjusting for change in fair value of gains and losses on commodity and interest rate derivative instruments not associated with current-period transactions. It is impracticable to determine actual gains and losses on these instruments not associated with current-period transactions that will be reported in GAAP net income as such gains and losses will depend upon future changes in commodity prices and interest rates which cannot be forecasted.
(h) Represents the midpoint of Adjusted EBITDA guidance range for fiscal 2016.

Contacts

Jack Herrold, Investor Relations – jackherrold@ferrellgas.com or (913) 661-1851

Jim Saladin, Media Relations – jimsaladin@ferrellgas.com or (913) 661-1833

Scott Brockelmeyer, Media Relations – scottbrockelmeyer@ferrellgas.com or (913) 661-1830